IE upgrades 2018 NODX forecast on 2017 rebound

NODX growth of 1-3 per cent expected, up from previous prediction of 0-2 per cent


SINGAPORE'S trade forecast for 2018 has been upgraded, after a turnaround in 2017 which saw non-oil domestic exports (NODX) growing at the fastest pace in seven years.

NODX growth was 8.8 per cent in 2017, a stark reversal of the 2.8 per cent decline in 2016.

This was the fastest growth since 2010, also beating trade promotion agency International Enterprise (IE) Singapore's earlier prediction of 6.5 per cent to 7 per cent.

Trade growth is expected to be firm this year, though there could be moderation from 2017's rapid pace, IE Singapore said in its Review of 2017 Trade Performance on Wednesday. It now predicts NODX growth of 1 per cent to 3 per cent in the coming year, up from its previous prediction of 0 per cent to 2 per cent.

"Favourable sector-specific export trends in the machinery and chemicals clusters are expected to continue into 2018, coupled with a slight pick-up in global growth projected by the IMF in its latest January 2018 World Economic Outlook update," said IE Singapore.

But it noted that growth is expected to ease for some key trade partners such as China, Japan, some of the Newly Industrialised Economies, and the eurozone.

Bank of America Merrill Lynch economist Mohamed Faiz Nagutha said the expected moderation in the pace of NODX growth is largely technical, coming after 2017's large rebound - which was in turn due to a low base in the previous year.

OCBC economist Selena Ling said the forecast upgrade reinforces the picture of an improved external demand outlook.

OCBC's NODX growth forecast remains at around 5 per cent, assuming that domestic fiscal and monetary policy does not tighten and concerns about external trade protectionism do not materialise.

DBS economist Irvin Seah, while optimistic about continued trade expansion, similarly highlighted concerns over protectionist rhetoric from the United States: "Though it may or may not play out, it's certainly a risk worth watching."

Last year's strong NODX growth was due to both the electronics and non-electronics sectors.

Domestic exports of electronics products - comprising 29 per cent of NODX - grew 8 per cent, a turnaround from 2016's 4 per cent contraction. The largest contributors were integrated circuits, disk media products and PC parts.

Non-electronics NODX grew 9.2 per cent, after shrinking 2.3 per cent in 2016. This was led by specialised machinery, petrochemicals and non-monetary gold.

NODX to nine of the top 10 markets grew last year, with the exception being Hong Kong (down 1 per cent). The biggest contributors to 2017 NODX growth were China (up 31.1 per cent) and South Korea (up 43.5 per cent).

But Mr Faiz cautioned: "We need to stay alert to activity in China where we are projecting a gradual growth slowdown."

China is Singapore's largest export market, accounting for over 18 per cent of NODX in 2017, versus the eurozone's 11 per cent and the US' 9 per cent.

IE Singapore also raised its growth projection for total trade to 3 per cent to 5 per cent, up from 1.5 per cent o 3.5 per cent previously.

This was after total merchandise trade rose 11.1 per cent in 2017, reversing declines in the preceding two years. Total trade fell 4.9 per cent in 2016 and 8.9 per cent in 2015.

Both oil and non-oil sectors contributed to trade growth in 2017. Oil trade grew 36 per cent amid higher oil prices, recovering from an 18.1 per cent decline in 2016.

In particular, oil domestic exports expanded by 33.4 per cent in 2017, after having fallen 12.6 per cent the previous year. This was driven by higher shipments to China (up 77.8 per cent), Indonesia (up 26.1 per cent) and Hong Kong (up 42.6 per cent).

"Oil prices are generally expected to be higher in 2018 than in 2017, supporting our oil trade," said IE Singapore.